From zero to largest IPO. How Alibaba is becoming the gold standard for B2B.

16

October

2016

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On September 19th 2014, Alibaba claimed the title for the largest IPO in the history of the NYSE. Rightfully so, Alibaba proved the power of platforms and how they can change the way business is done.

The company’s platform – Alibaba.com – is a trading platform that connects Chinese exporters with worldwide importers. Although the attractiveness of sourcing in China dates back to 1800 BC, Alibaba was the first to succeed at creating a new gold standard for companies to transact with Chinese manufacturers online on a global scale.

There is a number of factors that allowed Alibaba to get where it is now:

First, as a platform, Alibaba enjoys both positive cross-side network effects – manufacturers attract buyers, and buyers attract manufacturers – and positive same-side effects – for users, due to user generated content such as reviews and comments. The network effects are strong, and although the market is a multi-homing one, the richness, reach and affiliation of the platform allow it to become a dominant player.

Second, in contrast with its largest competitor, Amazon, Alibaba does not own any inventory. Alibaba simply facilitates conversation between buyers and sellers and allows them to shift the inventory between themselves.

Third, Alibaba decreased barriers to entry into the Chinese market and significantly shifted the bargaining power to buyers. Furthermore, it reduced coordination costs of companies by enabling to negotiate coherently via the platform.

Fourth, On Alibaba.com, buyers can select from large variety of manufacturers and products. The supply-side drivers of sellers being able increase their reach & decrease promotion costs and the demand-side drivers of buyer using the powerful Alibaba search engine in combination with the product recommendation feature, allowed the company to create long-tail of stock.

The Chinese giant created a textbook-example of a platform with incredibly strong network effects that facilitate an average of 12.7 billion dollars in orders per year. Since Alibaba owns zero inventory, it has the ability to entirely shift its focus on scaling and improving its platform. However, the question is, what’s next?

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Technology of the Week – Disrupting Financial Exchange Markets (Group nr.: 87)

6

October

2016

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Feel free to view our video. Below you will find a summary of what the video is about.

 

Our video focuses on financial exchange markets and recent disruptive developments within them. We analyse how new technologies introduced by various companies are transforming the way traditional financial exchange markets have operated in the past.

 

The first known form of an investment exchange market was founded in 1602 by the Dutch East India company VOC. About a hundred years later, in 1792, an agreement between a group of American stock brokers led to the formation if the New York Stock Exchange and Wall Street. After the first electronic stock market – NASDAQ – was introduced in 1972, new technologies allowed the exchange market to become more decentralized and dynamic. In 1975, the American government decided to deregulate and allow new brokers with new business models to enter the market. Further developments led to the emergence of two generic types of brokers. Full-service brokers and discount brokers, that charge different commissions to customers.

 

The barriers to entry into the traditional exchange market system are somewhat high for individuals who do not possess the required capital or knowledge. However, we will elaborate on two apps have attempted to disrupt this.

 

In the first example, the stock trading app, Robinhood. This app charges 0% commission on stock trading. Robinhood takes on a lean business model approach and applies it to financial exchange markets. The key advantages of Robinhood include an ability to differentiate itself from competitors by offering a 0% commission trading system as well as being a first mover, allowing the company to develop a first app of its kind to offer such a service. However, Robinood’s business model may be threatened due to its target market having low capital to invest. Furthermore, since the target market knowledge & experience of consumers is lacking, losses that are incurred by the customer early could be detrimental to customer growth and retention.

 

In the second example, Acorns is an app that generates capital for the average consumer by rounding up daily expenses. Acorns has two key advantages. First, customers require no previous investment knowledge. Second, consumers save as they go; as customers spend money on daily activities, the rounded up cents are invested into the trading portfolio of the customer’s choice. A disadvantage of this app is that investors have no control over the actual purchases and sales of the stocks themselves. Furthermore, there is a lack of transparency since customers cannot see which securities are being traded.

 

Technology has helped move this industry from hierarchies with dominant brokers on Nasdaq into markets with many new types of brokers like discount brokers and Robinhood. Throughout history, we have seen a movement from biased markets with high commissions, to unbiased markets with more players and lower commissions. This transformation has been here since the deregulation in 1975. However now we are seeing a movement from an unbiased market to a personalized market with companies like Acorns. This suggests that that in the future, big brokers and banking institutions will not be necessary.

 

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How Inbound Marketing is Turning Sales Upside Down

6

October

2016

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You are sitting on your chair in your office cubicle, ready to pick up the phone and dial Edward, the sales manager of that one large company you want to so dearly close. You find his phone by rigorously surfing the internet and are ready to initiate your first contact with him.

After persistently calling him 3x a day, 7x a week without any luck, Edward picks up the phone.

“Hello?” Says the contact person.

It took only 5 seconds, and you lost one of your biggest fish in your sales channel. He had no interest in what you were selling, he did not have enough time to listen to you and frankly, you kind of pissed him off with your calling endurance.

 

“Pick up the phone and stat dialing”

In the business world, traditional sales consisted of picking up the phone and dialling numbers – also known as ‘cold calling’. Companies often divided the customer buying cycle into two phases – Awareness and Purchase. If you have seen Scorsese’s Wolf of Wall street, you are definitely familiar with this topic. In many companies, the tasks of a salesperson was to dial as many numbers as possible and sell a product to a person who as usually had no idea he or she would be called by a salesman and offered such a product. Most probably the person never even heard of the company or the product. The game was simple: Call as many numbers as you can, and surely some you will close a deal at some point.

Things have changed since the 90s. Quantity over Quality is not sexy anymore. Customers are more selective than ever before. Why? Because the internet has made things immensely transparent.  Customers can now compare products and services more simply than ever.

 

The new way of doing business online.

The new trend is leaning towards delivering content to potential customer at every point of the buying cycle. How? By using inbound marketing.

Probably the best example of a company offering an inbound marketing solution is Hubspot. Hubspot is an inbound marketing and sales platform that supports companies in attracting new visitors and converting leads. The platform consists of multiple components including a CRM, Sales and Marketing system.

Hubspot allows companies to create value at every stage of the customer buying cycle. It splits up the cycle into the following 4 categories:

  • Attract
  • Convert
  • Close
  • Delight

How does one create value at each stage? By delivering content that the customer wants specifically at that stage. This means that while a potential customer in the lead stage might receive a “free template for 5 business infographics,” a customer in the close stage will be offered a product demo with someone from the sales team. Hubspot is essentially turning sales upside down – Customers come to you, instead of you going to the customers.

Inbound marketing is a fairly new, however, it has proven itself to be one of the most effective marketing strategies for doing business online. Instead of cold calling, sending out generic newsletters, buying ads and hoping for leads, inbound marketing focuses on attracting the customer to content that attracts people to your product.

No more annoying phone calls. No more unnecessary spam. No more generic marketing campaigns. The future of sales lies in the hands of serving customers with what they want. Only by attracting customers this way can you guarantee, that they will be willing to listen to what you have to say once they answer your phone call.

 

 

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